Blockchain is the new Bitcoin.
Well not literally.
But it is the term, that has people as confused as Bitcoin once had.
Everyone has their vague understanding of what it means and hopes that it’s just a fad that they wouldn’t have to take seriously.
But like the Bitcoin, the concept of Blockchain is rather simple and here to stay. To put it in the simplest of definitions – blockchain is a public ledger where accounting transactions are recorded and confirmed anonymously. These records of transactions are shared among many and the real-time information that is once recorded cannot be altered.
The owning of crypotocurrencies is solely digital, and the transfer of the their ownership is what creates a record in the blockchain. Now, since Blockchain is a public ledger, it isn’t run/managed or located in one space, rather it is located on multiple nodes – wherein each node hosts a copy of the entire Blockchain. This is what makes this public ledger secure and sturdy.
Just like the charm of Bitcoin, the charm of Blockchain is that it is anonymous, decentralized, and there are no fees or third parties trying to grab a percentage. This means that functions such as transferring currency overseas no longer requires that you pay a hefty cut of 20% to a third party like Western Union, or have to go through a series of procedures to get the money transferred. Within Blockchain a debit in one account is a direct credit in another , which also means that currency transfer is realtime and not a tedious wait.
This is just one of the many benefits of cryptocurrency transactions.
Coming back to how Blockchain works, lets see what a Blockchain “entry” look like. The traditional 2 value entry of debit and credit is replaced by 4 elements :
- A reference to the previous block
- Summary of transaction
- Time stamp of transaction
- Proof of work which went into creating the block
This 4 entry link makes for one block, and many such blocks are strung into a chain of valid and consistent cryptocurrency transactions. While this may sound easy enough to be misused – block creation needs numerous independent confirmations and add to that a complex to crack system and substantial hardware capabilities. These blocks are created by miners , who get incentives for their work, i.e. this is how they make their coins.
While crytocurrency and block chain have been around for quite some while, their true potential is yet to be realized. All sorts of complicated currency transactions can benefit from public ledger systems, not to mention the obstacles of boundaries, logistics etc that can be safely breached.
New York-based fintech startup R3 has over 21 major banks in partnership to develop Blockchain technologies. These include Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, JP Morgan, State Street, Royal Bank of Scotland, UBS, Banco Santander, Danske Bank, Sumitomo Mitsui Banking Corporation and Westpac.